"In one settled case, the district court judge had to order the
US Attorney’s office to open a criminal investigation,
investigation based on evidence he saw in a private civil case
where there was evidence of money laundering, fraud, health care
fraud, wire fraud, also sorts of RICO violations, a federal
judge had to order the justice department to investigate. That’s
a big problem."

"It shall be unlawful for any
person through the use of fraud, force, violence, or threat of
the use of force or violence, to restrain, coerce, intimidate,
or attempt to restrain, coerce, or intimidate any participant or
beneficiary for the purpose of interfering with or preventing
the exercise of any right to which he is or may become entitled
under the plan, this title, section 3001, or the Welfare and
Pension Plans Disclosure Act. Any person who willfully violates
this section shall be fined $10,000 or imprisoned for not more
than one year, or both. The amount of fine is governed by 18
U.S.C. § 3571. The U.S. Sentencing Guidelines address 29 U.S.C.
§ 1141 under the guidelines for "Fraud and Deceit" (U.S.S.G. §
2F1.1) or for "Extortion by Force or Threat of Injury or Serious
Damage (U.S.S.G. § 2B3.2)......"

"For example, Section 1141
would reach the use of deception directed
at misleading a welfare plan beneficiary as to the amount of
health benefits owed to the beneficiary under the terms of the
plan or at misleading a pension plan participant as to
the amount of retirement benefits to which he would become
entitled under the plan upon his retirement."

"EBSA closed 4,399 civil investigations in
FY 2004. Nearly 70% of those investigations resulted in correction
of violations under the Employee Retirement Income Security Act
(ERISA). Criminal investigations led to
the indictment of 121 individuals. In addition, EBSA received a
record 474 applications to participate in its compliance assistance
program to help employers and plan officials to voluntarily correct
specific violations of the law."

"New York's Attorney General now has employee-benefits
insurers in his sights. A federal probe could be next... WASHINGTON, TOO? "We found that favoritism,
secrecy, andconflicts rule this market, and not open
competition," said Spitzer in testimony about the insurance ..."

Excerpt: "In pleading guilty, [John B.] Hyde
admitted that he was president of ISI which operated in Novato
[California]. ISI marketed and sold a health plan known as the ERISA
Employee Health Benefit Plan or the ERISA
Advantage. The health plan was marketed and sold to thousands
of people throughout the country who believed that they were covered
by a legitimate health plan."

"Three people were arrested
this morning for allegedly orchestrating a scheme to defraud
the customers of Employers Mutual LLC, a company that
purported to provide health care coverage to more than 20,000
people across the United States, but left more than $30
million in unpaid claims for medical services when it was shut
down."

"Deputy Attorney General
James B. Comey stated: “The Department of Justice is committed
to the prosecution of individuals who operate bogus health
insurance schemes. These schemes victimize the employees,
individuals and families who believed they had health care
coverage but are left uninsured with devastating personal
liability for unpaid medical claims.”

"One of the Department of
Labor's highest priorities is to protect the benefits of
workers and their families,” said Ann L. Combs, Assistant
Secretary of Labor for Employee Benefits Security. “These
corrupt individuals took advantage of the trust that small
businesses and their workers placed in them to provide
health benefits. Today's indictments demonstrate our
commitment to vigorously pursue those who prey on people
seeking affordable health coverage for themselves and their
families and ensure that they are prosecuted to the fullest
extent of the law."

"If you are an
employee or family member of an employee who receives
health benefits from a health
plan provided through employment in the
private sector, a federal law, the Employee Retirement
Income Security Act (ERISA),
protects you. Among the
protections, ERISA sets standards for administering these
plans. Those standards require plans to give you important
information about the plan and to have a fair process for
handling benefit claims.

Below are steps you
should take to file a benefit
claim and what to do if your claim is denied.
It is especially important to know your rights under
your plan and the law if your benefit claim is denied.

The
first step you should take -
even before you are ready to file a benefit claim - is
to carefully read your plan's summary
plan description. This is a document which your plan
administrator must furnish to you after you join the plan. You
can also request a copy from your plan administrator.
The SPD gives you a detailed summary of
your plan - - how it works, what benefits it provides,
and how they may be obtained (the process for filing your
claim). The summary plan description is
also required to describe your rights and protections under
ERISA."

"(q) The identity of any
funding medium used for the accumulation of assets through which
benefits are provided. The summary plan description shall identify
any insurance company, trust fund, or any other institution,
organization, or entity which maintains a fund on behalf of the
plan or through which the plan is funded or benefits are provided.
If a health insurance issuer,
within the meaning of section 733(b)(2) of the Act, is
responsible, in whole or in part, for
the financing or administration of a group health plan, the
summary plan description shall indicate the name and address of
the issuer, whether and to what extent benefits under the plan are
guaranteed under a contract or policy of insurance issued by the
issuer, and the nature of any administrative services (e.g.,
payment of claims) provided by the issuer."

Excerpt: "That's one possible conclusion in the wake of the
Enron scandal.
According to David Maister, who's been studying professional-services firms
for more than 20 years, it's time to clear the air."

"But third-party payment is not the ultimate
cause, either. Our system of third-party payment is the direct
result of many decades of well-intentioned, but short-sighted
and ultimately misguided state and federal policies. These
policies have had far-reaching and negative consequences that
were unforeseen (but not unforeseeable) when they were enacted.

I will deal today with two – federal tax
policy and ERISA – but these are
only two of the more prominent examples. Other federal laws that
have contributed to the problems we face include the Hill-Burton
Act of 1946, the McCarran-Ferguson Act of 1947, price controls
in the early 1970s, the HMO Act of 1973, the Health Planning Act
of 1974, various aspects of Medicare and Medicaid, COBRA, HIPAA,
and a range of state and federal mandates."

March 3, 2004 (Senate
Committee on Small Business and Entrepreneurship)

"Snowe called operators of such fraudulent plans “masters” at playing an
intricate insurance shell game. “They know how to stay one step ahead of the
enforcement authorities by characterizing their operations as just beyond
the reach of that authority,” Snowe said. “If a state
pursues them, they will claim that they are federally regulated. If the
federal government comes after them, they will say that they are a state
regulated insurance company.”

"Senator Thomas: Ms. Kofman, do you have any other
suggestions other than that in terms of resolving the problem?

Mila Kofman: Ya, I think there’s a perception out there
that the justice department is not prosecuting these cases and I think there
is good reason for that perception because we have not seen any criminal
indictments on these current operators. So one of the suggestions I have for
you is to ask the justice department why they’re not going forward with
these cases. In one settled case, the district
court judge had to order the US Attorney’s office to open a criminal
investigation, investigation based on evidence he saw in a private civil
case where there was evidence of money laundering, fraud, health care fraud,
wire fraud, also sorts of RICO violations, a federal judge had to order the
justice department to investigate. That’s a big problem."

All the unauthorized health plans discussed in the
GAO report have two factors in common.
They all offer a plan that claims to provide
employee benefits subject to the Employee Retirement Income Security
Act of 1974 (ERISA), and they all claim to be exempt from state
insurance regulation under ERISA. Unauthorized health plans
take several different forms. They typically claim to be unions,
business associations, professional associations, out-of-state trusts,
single-employer plans, or some combination."

"WASHINGTON (Reuters Health) - More than 15,000 employers bought 144
separate bogus health insurance plans that left an estimated 200,000
policyholders with at least $252 million in unpaid
claims between 2000 and 2002, the General Accounting Office told a U.S.
Senate Committee Wednesday."

"A key problem with catching operators of
health insurance scams, testified Texas Insurance Commissioner Jose
Montemayor, is that many plans manage to avoid state officials by
claiming to be exempt under the Federal Employee
Retirement Income Security Act, ERISA."

"Mila Kofman, an assistant research professor from Georgetown University,
said another problem is
that the U.S. Justice Department has not been active enough. "Civil
actions do not stop those who engage in criminal conduct," she testified.
"They change their name, move to another state and repeat the scam.
What is necessary are criminal actions that result in
a jail sentence," she told the committee."

"The federal government regulates most private employer-sponsored pension
and benefit plans as required by the Employee Retirement Income Security Act
of 1974. But the GAO says that under ERISA,
self-funded employer group health plans are not subject to state oversight,
increasing the probability of illicit activity.

Flanagan said until there is more regulation and
consumer education in the industry, these loopholes are likely to
stir more trouble for employers and individuals seeking affordable health
insurance."

18 pages issue brief. Excerpt: "This segment of the health insurance market
continues to grow as people who lose their traditional employer based
insurance seek low-cost alternatives that seem to promise group protections.
It is also a reflection of the spotty and largely inadequate regulatory
system that is supposed to oversee this sector of the market."

"By a
Memorandum of Understanding dated February 9, 1975, between
the Secretary of Labor and the Attorney General, criminal
matters arising under 18 U.S.C. § 1027 are investigated by the
Federal Bureau of Investigation (FBI). The Memorandum permits
different arrangements to be made by the Department of Justice
and Department of Labor on a case-by-case basis." (Criminal
Resource Manual 2435 Investigative Jurisdiction -- 18 U.S.C.
1027)

§ 2520.101–2 (b)(3): b) Definitions. As
used in this section, the following definitions apply:

Administrator
means--"(3) In the case of a MEWA or ECE for which
an administrator is not designated
and a plan sponsor cannot be identified,
jointly and severally the person or
persons actually responsible (whether
or not so designated under the terms of the instrument
under which the MEWA or ECE is operated)
for the control, disposition, or management of the cash or
property received by or contributed to the MEWA or ECE,
irrespective of whether such control, disposition, or
management is exercised directly by such person or persons
or indirectly through an agent,
custodian, or trustee designated by such person or persons."

Any person who willfully
violates any provision of part 1 (Reporting and Disclosure) of
this subtitle (Subtitle B-Regulatory Provisions of ERISA), or any
regulation or order issued under any such provision, shall upon
conviction be fined not more than $5,000 or imprisoned not more
than one year, or both; except that in the case of such violation
by a person not an individual, the fine imposed upon such person
shall be a fine not exceeding $100,000. [The amount of the fine is
governed by 18 U.S.C ?.]

The gravamen of offense is
the willful omission to perform reporting or disclosure required by
ERISA. Falsification of required ERISA documents (records, reports,
and certified information) is punishable as a felony at 18 U.S.C. §
1027. See 9-136.000. Caveat: Breach of fiduciary duty
in Title I of ERISA without more is not a crime.

That from on or
about (date) in the __________ District of ___________, in
[a] document[s] required by Title I of the Employee Retirement
Income Security Act of 1974 ("ERISA") to be [kept as part of the
records* of][certified to the administrator** of] (name of
employee welfare or pension plan) , an [employee welfare benefit
plan][employee pension benefit plan], the defendant ____________
did make false statement(s) and
representation(s) of fact, knowing the same to be false, and did
knowingly conceal, cover up and fail to disclose facts, [the
disclosure of which was required by ERISA] [which were necessary to
verify, explain, clarify and check for accuracy and completeness]
the (name of required report or information document) , [a
report required by ERISA to be published***][information required by
ERISA to be certified to the administrator], that is, (describe
false entry made, facts knowingly concealed, etc.) .

All in violation of
Title 18, United States Code, Sections 1027 and 2.

*** See 29 U.S.C. §§ 1024(b)
concerning the plan administrator's publication of annual financial
reports of the plan [Form 5500 series], which are filed with the
Secretary of Labor via the Internal Revenue Service, and plan
descriptions.

By a Memorandum of
Understanding dated February 9, 1975, between the Secretary of Labor
and the Attorney General, criminal matters arising under 18 U.S.C. §
1027 are investigated by the Federal Bureau of Investigation (FBI).
The Memorandum permits different arrangements to be made by the
Department of Justice and Department of Labor on a case-by-case
basis.

However, effective
October 12, 1984, the Department of Labor may also investigate
criminal violations related to the regulation of employee pension
and welfare plans which are subject to Title I of the Employee
Retirement Income Security Act (29 U.S.C. §§ 1001 to 1169) without
further delegation of investigative authority by the Department.
See 29 U.S.C. § 1136, as amended by the Comprehensive Crime
Control Act of 1984, Sec. 805; 98 Stat. 2134-35. Therefore,
Department of Labor investigators now have the express statutory
authority to investigate violations of 18 U.S.C. § 1027. Because the
FBI and the Department of Labor have concurrent jurisdiction in
these cases, each investigative agency should notify the appropriate
United States Attorney's Office at the earliest possible stage of an
investigation. Such investigations should be closely monitored to
avoid duplication of investigative effort.

The following materials have been prepared in part by the
Labor-Management Unit of the Organized Crime and Racketeering
Section (202) 514-3666 and published in Criminal Case
Prosecutions Involving Employee Benefit Plans: Prosecutor's Guide
(United States Department of Labor, Pension and Welfare Benefits
Administration, 1994).

In
order to establish a violation of 29 U.S.C. § 1131, the government
must allege and prove the following essential elements:

The
jurisdictional entity involved is an employee benefit plan within
the meaning of Title I of ERISA (29 U.S.C § 1001 et seq.)

The violator
had an obligation pursuant to ERISA.

Under section
1131, "any person," refers to a person who has an obligation to
comply with the reporting and disclosure provisions of part I, Title
I of ERISA (29 U.S.C. § 1021). Generally, the person who has such an
obligation is the "administrator," who is the person specifically
designated in the plan documents, or if not designated, the
administrator would be the sponsoring employer or employee
organization or both (plan sponsor). The terms "administrator" and
"plan sponsor" are defined in section 3(16) (29 U.S.C. § 1002 (16)).
Also included, are persons required to certify information, such as
an insurance carrier or bank, as specified in section 103 (29 U.S.C.
§ 1023).

The defendant
willfully violated Title I, Part I, ERISA.

Section 1131
punishes anyone who "willfully violates" a statutory reporting or
disclosure requirement in ERISA or regulation or order issued under
those statutory provisions. In United States v. Phillips, 19
F.3d 1565 (11th Cir. 1994), aff'dsubnom.
USX Corp. v. United States, 115 S.Ct. 1312 (1995), the corporate
sponsor of an employee pension plan was convicted of having
willfully caused the plan administrator not to furnish plan
participants with a summary description of a material modification
in the terms of the plan as required by ERISA, namely, changes in
the rules of eligibility for pension credits due former corporate
employees who had become labor representatives.

On appeal the defendant challenged the court's instruction to the
jury that it need only find that the defendant had "knowingly and
intentionally committed the acts which [violated Part 1 of ERISA]
and . . . were not committed accidentally or by some mistake."
Id.
at 1583. Rejecting the defendant's claim that the jury should have
been instructed that section 1131 requires a "specific intent to do
something the law forbids; that is with bad purpose to disobey or
disregard the law," the court upheld the trial court's instruction
that section 1131 requires only a general intent and knowledge of
one's acts. In construing section 1131, the court in Phillips
reasoned that the ERISA misdemeanor does not require proof of a
specific intent to violate the law because the statutory defense
codified at 29 U.S.C. § 1028, based on good faith compliance with
Department of Labor regulations, would be redundant if "willfully"
required such specific intent and would, in effect, render the
"willfully" in section 1131 "meaningless surplusage." Id. at 1584.

See
alsoUnited States v. Tolkow, 532 F.2d 853 (2d Cir.
1976), upholding the conviction of a plan trustee for having
"knowingly" failed to report required party-in-interest transactions
in the plan's annual financial report under ERISA's predecessor, the
Welfare and Pension Plans Disclosure Act, in violation of 18 U.S.C.
§ 1027. Rejecting the assertion that section 1027 required proof of
a specific intent to violate the law and actual knowledge of the
reporting obligations, the court in Tolkow held that the
defendant need only have a reckless disregard of whether he was
violating the reporting obligation by failing to make any
disclosure. Id.
857-59 and cases cited therein.

REPORTING, DISCLOSURE, AND
RECORDKEEPING OBLIGATIONS

DOCUMENTS
REQUIRED TO BE FILED

Documents that
an ERISA plan administrator is required to file include:

Documents that an ERISA plan administrator is required to disclose
include:

·A summary plan
description;

·Modifications
and changes to the plan;

·A summary
annual report;

·A statement of
accrued and vested benefits;

·The latest
Annual Report (Form 5500 series); and

·Documents under
which an employee benefit plan is established or operated (i.e.,
plan document and any trust agreement).

Documents which must be disclosed on request, including a
statement of accrued and vested benefits, the latest Annual Report
(Form 5500), and the Plan Document.

RECORD RETENTION

Section 107 (29 U.S.C. § 1027) states that:

"every person subject to a
requirement to file any description or report or to certify any
information...shall maintain records on the matters of which
disclosure is required WHICH WILL PROVIDE IN SUFFICIENT DETAIL
THE NECESSARY BASIC INFORMATION AND DATA FROM WHICH THE
DOCUMENTS THUS REQUIRED MAY BE VERIFIED, EXPLAINED, OR
CLARIFIED, AND CHECKED FOR ACCURACY AND COMPLETENESS, AND SHALL
INCLUDE VOUCHERS, WORKSHEETS, RECEIPTS, AND APPLICABLE
RESOLUTIONS, and shall keep such records available for
examination for a period of not less than six years after
the filing date of the documents based on the information which
they contain, or six years after the date on which such
documents would have been filed but for an exemption..."

EXEMPTIONS FROM REPORTING AND
DISCLOSURE

The following plans are exempt from ERISA's Reporting and
Disclosure requirements:

Any employee welfare plan which covers fewer than

100 participants at the beginning of the plan year;

Any employee pension or welfare plan whose benefits are provided
solely from the general assets of the employeror employee
organization maintaining the plan;

Any employee pension or welfare plan whose benefits are provided
exclusively through insurance contracts or policies issued by an
insurance company, provided that any contributions made by the
employees are forwarded to the insurance company within three
months;

Any employee welfare plan which is an apprenticeship plan that
exclusively provides apprenticeship training benefits provided:

that the
administrator files certain information with the Secretary
of Labor;

ensures
that the information required to be contained in such notice
to the Secretary of Labor is also disclosed to employees of
employers contributing to the plan who may be eligible to
enroll in any course of study sponsored or established by
the plan; and

makes the
above information available to employees upon request; or

Any employee welfare benefit
plan which provides for day care centers.

It shall be
unlawful for any person through the use of fraud, force, violence,
or threat of the use of force or violence, to restrain, coerce,
intimidate, or attempt to restrain, coerce, or intimidate any
participant or beneficiary for the purpose of interfering with or
preventing the exercise of any right to which he is or may become
entitled under the plan, this title, section 3001, or the Welfare
and Pension Plans Disclosure Act. Any person who willfully violates
this section shall be fined $10,000 or imprisoned for not more than
one year, or both. The amount of fine is governed by 18 U.S.C. §
3571. The U.S. Sentencing Guidelines address 29 U.S.C. § 1141 under
the guidelines for "Fraud and Deceit" (U.S.S.G. § 2F1.1) or for
"Extortion by Force or Threat of Injury or Serious Damage (U.S.S.G.
§ 2B3.2).

In order to
establish a violation of 29 U.S.C. § 1141, the government must
allege and prove the following essential elements:

1.The
jurisdictional entity involved is an employee benefit plan within
the meaning of title I of ERISA (29 U.S.C. §§ 1001 et. seq.).

2.The
victim is a participant or beneficiary as defined in the statute.
"Participant" and "Beneficiary" are defined at 3(7) and 3(8)(29
U.S.C. § 1002).

3.The violator can be any person who uses fraud,
force, violence, or threats of force or violence.

4.The
violator restrained, coerced, or intimidated, or attempted to
restrain, coerce, or intimidate, a participant or beneficiary for
purposes of interfering with their protected rights.

5.Protected rights
include any right to which a participant or beneficiary is or may
become entitled to under the plan, Title I of ERISA, 29 U.S.C.§ 1201
(relating to tax qualification of the plan), or the WPPDA
(predecessor statute to ERISA).

6.The
violator acted WILLFULLY.

For example,
Section 1141 would reach the use of deception directed at misleading
a welfare plan beneficiary as to the amount of health benefits owed
to the beneficiary under the terms of the plan or at misleading a
pension plan participant as to the amount of retirement benefits to
which he would become entitled under the plan upon his retirement.

Forbes.com:"Roughly one in seven Americans has
no health insurance. That hurts HCA Inc. (nyse:
HCA -
news
-
people), the largest U.S. hospital chain, which
last year wrote off $2.21 billion of revenue because patients couldn't pay their
bills."

The American Hospital Association (AHA): "Hospitals today are faced with the challenge of managing their
limited resources, while continuing to deliver the highest standard of care.
According to health care experts, the cost of clinical
denials to individual healthcare organizations averages $3.3 million
annually. However, many hospitals do not have the resources or the
expertise needed to avoid unpaid days at the end of admissions and lead the
denial-appeals processes."

"MAMSI and CareFirst recoup overpayments to
doctors by making deductions from future reimbursements.
Doctors can appeal insurers'
decisions. But, in the end, they usually pay up, doctors
and insurers agree."

"DETROIT, April 19 /U.S.
Newswire/ -- The Blue Cross and Blue Shield Association (BCBSA)
today announced a new Anti-Fraud Strike Force comprised of top
Blue Plan investigators that will work with the Federal Bureau
of Investigation (FBI) and other national, state and local law
enforcement agencies to fight major insurance fraud schemes that
rob consumers of millions of dollars annually. BCBSA President
and CEO Scott P. Serota announced the new initiative in a speech
to the Detroit Economic Club."

"The case is somewhat
unusual in that a corporation was named as a criminal defendant
in the case,
but Kaiser said that is not unheard of since corporate law can
make a firm liable for criminal wrongdoing, and its principal
office holders in return are responsible for any judgments or
punishments the courts impose.

David Griem,
the defense attorney for Emergency Management who was also named
the principal to enter a guilty plea on its behalf,
also could not be reached for comment after the sentencing
hearing. In court, however, he turned over a check to the Blue
Cross insurance company officials in attendance and said the
company would pay the $5,000 court costs on time as well."

"On June
4, 1998, in the District of Maryland, Levindale Geriatric
Hospital paid $800,000 to resolve allegations it violated
the FCA by recoding and resubmitting
denied charges for room and board. After the claims for room
and board were denied by the Medicare Part A program,
Levindale recoded the claims as supplies, laboratory work
and other services, and submitted the claims for payment.
In addition to paying a substantial penalty under the FCA,
Levindale entered into a compliance agreement with HHS-OIG"

On Sept. 2, 1974,
exactly 30 years ago today, ERISA, The Employee Retirement
Income Security Act,
was signed into law by President Gerald R. Ford. The congressional intent in enacting ERISA was to
protect employees in pension and welfare plans, to provide
uniform federal protections in response to the failure of the
Studebaker Co. in December 1963, with thousands of long-service
employees cheated out off their promised pensions, and to
preempt any state laws when the employees pension and welfare
benefits were threatened. 30 years later, ERISA Failure in its
compliance and enforcement left thousands of retirees without
medical benefits, and resulted in a skyrocketing national healthcare expenditure explosion with 45 million uninsured and a possible national pension bailout.

"The official U.S. budget deficit, which is calculated using cash
accounting, hit a record $374 billion in fiscal year 2003. That figure
becomes a whopping $665 billion under the accrual method the
government uses to compile its annual financial report."

Excerpt: "We were
surprised to find in our latest tracking poll that more Americans are
worried about health care costs than about losing their job, paying
their rent or mortgage, losing money in the stock market, or being a
victim of a terrorist attack.

Nearly four in 10
Americans (38%) say they are very worried that the amount they pay for
health care services or health insurance will increase, and a similar
share (37%) is very worried that their income might not keep up with
rising prices over the next six months."

"Pipal said there is little recourse for disgruntled physicians and
their patients, because managed-care companies function under the
Employee Retirement Income Security Act (ERISA) of 1974, a federal law
with new provisions governing health care benefits."

Excerpt: "That's one possible conclusion in the wake of the
Enron scandal.
According to David Maister, who's been studying professional-services firms
for more than 20 years, it's time to clear the air."

"According to the video, when faced with claims for identical
medical problems, Aetna separates the claims where no damages
are available - those subject to the federal Employee Retirement
Income Security Act, or ERISA - from non-ERISA claims, where
consumers can sue.1 2"

Opinion: The Coming Crash in Health Care (Fortune.com)"Thus it may come as a surprise to
learn that the managed-care industry is dying. Oops, did we spill the
beans so soon? Well, so be it. Managed care is on the way out."